Correlation Between Faraday Future and US Bancorp

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Can any of the company-specific risk be diversified away by investing in both Faraday Future and US Bancorp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Faraday Future and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faraday Future Intelligent and US Bancorp, you can compare the effects of market volatilities on Faraday Future and US Bancorp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Faraday Future with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Future and US Bancorp.

Diversification Opportunities for Faraday Future and US Bancorp

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Faraday and US Bancorp is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Future Intelligent and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and Faraday Future is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Faraday Future Intelligent are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Faraday Future i.e., Faraday Future and US Bancorp go up and down completely randomly.

Pair Corralation between Faraday Future and US Bancorp

Given the investment horizon of 90 days Faraday Future Intelligent is expected to under-perform the US Bancorp. In addition to that, Faraday Future is 4.96 times more volatile than US Bancorp. It trades about -0.23 of its total potential returns per unit of risk. US Bancorp is currently generating about -0.3 per unit of volatility. If you would invest  4,534  in US Bancorp on July 3, 2022 and sell it today you would lose (502.00)  from holding US Bancorp or give up 11.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Faraday Future Intelligent  vs.  US Bancorp

 Performance (%) 
       Timeline  
Faraday Future Intel 
Faraday Performance
0 of 100
Over the last 90 days Faraday Future Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
US Bancorp 
US Bancorp Performance
0 of 100
Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

US Bancorp Price Channel

Faraday Future and US Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Faraday Future and US Bancorp

The main advantage of trading using opposite Faraday Future and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Future position performs unexpectedly, US Bancorp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in US Bancorp will offset losses from the drop in US Bancorp's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Faraday Future as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Faraday Future's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Faraday Future's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Faraday Future Intelligent.
The idea behind Faraday Future Intelligent and US Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
US Bancorp vs. Amazon Inc
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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